US President Donald Trump has announced an agreement with Russian President Vladimir Putin for Russian diesel to be released immediately to the United States and world markets, as his administration moves to curb fuel costs weeks before the midterm elections, the BBC reports.
Under the deal announced on Friday, more than 300,000 tonnes of diesel would be supplied straight away, followed by 500,000 tonnes in November and a further one million tonnes “immediately thereafter”, according to Trump.
He said diesel prices in the US and worldwide “will be COMING DOWN, IN RECORD NUMBERS, AND FAST!”, describing lower prices for Americans, “especially our Great Farmers, Ranchers, and Truckers”, as his greatest priority.
Trump added that a further three million tonnes of Russian diesel would follow “within a short period”, depending on the condition of Russian refineries.
Gasoline and diesel prices in the US have more than doubled since the US-Israel conflict with Iran began in February, the BBC reports, hitting transport businesses, farmers and drivers more broadly.
Why fuel prices matter at the ballot box
Trump’s announcement this week of a waiver allowing red dye diesel to be used on highways without federal levies underlined how central fuel costs have become in a midterm campaign dominated by affordability.
Public concern over the cost of fuel, food and other goods has been widespread, and voters have linked the issue to Trump and his party, weighing on Republican candidates ahead of the November vote.
Polling shows a majority of Americans disapprove of Trump’s handling of both the economy and the war in Iran, the BBC reports.
Global oil supplies have been constrained since the Middle East conflict effectively shut down the usual flow of oil and refined products through the Strait of Hormuz for months. Crude flows have nearly returned to pre-war levels, but the price remains above $100 a barrel, feeding through to diesel and gasoline.
David Ruisard, pricing manager at commodities intelligence firm Argus, said the war in Ukraine has also contributed to tighter oil supplies and higher fuel costs.
“Our estimates are that your price increase from about $3 a gallon up to $6 a gallon [for diesel] is 60% connected to the Strait of Hormuz, 40% connected to the Russia-Ukraine conflict,” he said.
Michael Pearce, chief US economist at Oxford Economics, said higher energy prices account for most of this year’s rise in inflation, which in turn is pushing interest rates up.
“The combined impact of higher rates and higher energy prices is squeezing household budgets and adding to firms’ costs,” he said.
Patrick De Haan, head of petroleum analysis at fuel price tracking site GasBuddy, said both gasoline and diesel have seen modest recent declines, which he attributed largely to “some of the manoeuvres that we’ve seen the Trump administration employ over the last couple of weeks”.
Red dye diesel and strategic reserves
The Friday diesel announcement follows a series of other policies floated by the president.
Earlier in the week, Trump said he would allow red dye diesel — fuel used off-road and normally exempt from federal taxes — to be sold for highway use without federal levies.
Ruisard said the only difference between the diesel used by truckers and everyday consumers and tax-free red dye diesel is the dye itself. The dye, he noted, is “extremely hard to clean it out of your tank”, creating a problem for trucking firms once the temporary tax relief lapses.
“The fines are pretty high for having that in your fuel tank because its considered tax evasion,” he said.
A second issue, Ruisard added, is that businesses including rail operators typically set aside a fixed volume of the product, so a sudden surge in consumption of dyed diesel would deplete that supply.
A different Trump move has had more success, according to analysts. Last week the G7 nations said they would release 100 million barrels of oil and diesel from stockpiles to ease supply concerns, following pressure from the White House.
De Haan said the announcement alone — regardless of how much has actually been released so far — “has worked to push prices down to some degree”.
Pearce agreed, but cautioned that the release is only a temporary fix.
“As long as energy exports from the Gulf remain disrupted, stocks will need to be drained further to supply the market,” he said. “And the need to refill those stocks will mean energy prices remain elevated for a period, even when disruption in the Middle East clears.”
Other levers the president has considered
Trump said earlier this week that he was “thinking about” suspending the federal tax on gasoline.
De Haan said the president has also been urging states to cut their own gasoline taxes, and several — among them Ohio and Georgia — have done so. State taxes make up a moderate share of the pump price, he said, and those reductions have helped bring down prices and national averages.
But suspending or lowering the federal gasoline levy would require Congress to act. “That may be difficult to obtain ahead of the midterm elections,” De Haan said.
He estimated that Indiana, which cut its gasoline tax in May, has lost $1bn (£760m) in state revenue as a result.
Trump has also previously backed calls to ban US diesel exports. Pearce said such a ban would bring partial relief to the Gulf and Midwest but offer “little benefit” to the Northeast and West Coast.
“The policy risks backfiring because it would result in stockpiling of diesel, and as that storage runs out, refineries would need to cut back on production,” he said. “That would raise prices of other energy products, including gasoline.”
De Haan said the president has “basically pulled all of the small levers that a president can pull, and we’re still seeing prices very elevated”.
“The only way out of this to reduce gas prices in a meaningful way is solve one or both of the geopolitical tensions that are causing high prices,” he said.
That would mean sealing a deal with Iran and helping broker an agreement between Ukraine and Russia — matters, Pearce noted, that the White House cannot control directly.
Even if those conflicts were resolved, Ruisard said, damage to Middle Eastern facilities from military strikes means production would take four to six months to normalise.
“The message to consumers and industry is that regardless of what happens and whether the president is able to successfully negotiate that kind of a deal,” he said, “high prices are here to stay for a little while at least.”
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